i'll see you back here at the top of the hour. don't go too far away for too long. >> thank your fans, work hard. don't say -- say thanks fans for supporting us. we'll try to do it again next year. the most important hand in the world is not a president or prime minister. he doesn't need congress or the executive branch to approve his policies. he controls the most important decisions that affect your money. i'm christine romans and i'm talking about ben bernanke the nation's top economist a depression historian trying to prevent one today. put the economy in terms we noneconomists understand. it's like a car. >> to return to the driving analogy, if the incoming data supports the view the economy's able to sustain a reasonable cruising speed we will ease pressure on the accelerator by gradually reducing pace of purchases. >> not put on the brake but was

ease off accelerator. the fed has been buying $85 billion a month in bonds. that money rushes into the economy, fueling a huge rally in stocks, huge rally until this week. it keeps interest rates low on your home and car loans. but investors are nervous that tapering, taking the foot off the gas, will end the big gains. just the fear of ben bernanke easing up on the gas pedal sent the dow down 500 points wednesday and thursday. regardless if you own any stocks, your money is on the line. terry sav itch, author of the savage truth on money, chief investment strategist, welcome to the program. you say all of the worrying about when stocks will pull back is a good thing. explain. >> well, i'm not saying that it's a good thing for your psyche to be worried about your investments overnight. blue the fact is, as you pointed out a lot of money flooded into, well, not so much the economy but mostly into the stock market with so much uncertainty

overhanging economy about regulation, health care and so forth a lot of the money has not come out of the banks and into loans to businesses or consumers. it's gone straight into the stock market. and money moves markets. now, you're right, the fed did not say tightening up. it said just not adding as much. and the paradox is, chairman bernanke said, we'll stop adding as we see the economy is strong enough to do it on its own. so, really that's not bad news for stocks. a growing economy. the idea that a lot of excess money will flow into the market, of course, scares -- that it will stop happening scares market participants. >> another surprise out of the news conference, moving the goalpost. when the jobless rate hit 7% the fed will likely pull back. we're at 7.6%. explain how lower unemployment could lead to negative results for the market. >> well, it's one of these things where if things go up too

fast in terms of the economy then the market participants, in particular those institutions who have now become reliant on monetary policy to drive stocks they may force mr. bernanke to become more aggressive and take the pedal off and put pressure off the pedal and start to taper a little bit. faster. i think that's what most people are worried. we think it's nonsense. fundamentals drive stocks and we're in the mid of a grand transition from dependency on monetary policy to dependency onfuls and we think there's volatility along the way. >> you might be right. volatility is something that certainly real normal investors like me and people i know are going to care. terry, i want to talk about who's invested in the market and their 401(k), nest egg, retirement. look at savings numbers for the beginning of the year you can see the average 401(k) account hit a record high of $80,900.

people 55 and older, they also hit a record high, $255,000 on average in retirement accounts. they had come so far since the deficit of the recession. if there's lot of volatility and fed getting how does someone with a retirement account like that protect themselves? >> that's a very good question. 401(k) retirement plans are designed to accumulate and grow wealth. it's the investments in them assuming they have low fees and the ideas that most of the investments inside your plan are designed to grow wealth tax deferred. if you're getting closer to retirement one of the things you want to do in the market up is rebalance so you have the appropriate amount in the stock funds. since there are not a lot of places to hide -- you don't want to be in bonds when rates are rising -- it's important to save outside your 401(k) plan. that can be in cash. bank deposits pay little but that offsets the risk and the opportunity for growth that's

designed to be inside your plan. that doesn't mean you get out of your plan. it doesn't mean you stop contributing. it means you save more in addition to those stock market funds. >> save more, save more, save more. i say that every week. people give me hate mail. i can't save more because i can't make the money last as long as the month. brian, last word to you. you see the dow down more than 350 points like it was on thursday. sometimes the first time people notice, really, when the market's down so much. people become frantic and approach me on days like thursday with one question, should i sell? my answer is always no, don't panic, don't lock in losses. you've got a number of folks like regular folks, not traders and professionals, just want free advice when they see the dow plunge. what is your free advice to normal people when they see the market move like it did this week. >> we have been through the cycles. what we would say is don't try to time the markets. stick with your analysis and

process in terms of what you're buy, be diversified, university opportunities like this to meet with financial adviser and talk about goals longer term. this is what creates opportunities. we believe that we're heading into a 15 or 20-year equity bull market and the issue with u.s. investors in particular is, we think now they're under exposed equities and that's a real opportunity for the next 15 to 20 years to be reallocated. >> you made me feel better, brian. ta thank you. coming up, former president george w. bush once told americans, he told them how they could help the economy. >> i encourage you all to go shopping more. >> is a recent surge in spending saving the economy or dooming us to repeat history? everyone's retirement dream is different; how we get there is not.

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spend, baby, spend. you the consumer are supposed to be the engine of this economy. a quick check shows all is not well. investors are worried the economy's not enough to -- adding slowing growth in china, uncertainty is back. but many of you, you never felt certain to begin with. a new cnn/orc poll finds 44% say they're worse off than a year ago. yet you are spending. spending rose 3.4%, the fastest pick up since the fourth quart or of 2010. u.s. economy relies on your consumption to thrive. but that spending is coming at the exspence of something else, saving. americans saved 2.3% of their disposable income in the first quart air post-recession low.

too much spending, too little saving. isn't that what got us into this trouble in the first place? terry savage is with us. nice to see both of you. terry, this week the national institute on retirement security said the retirement crisis is worse than it thought. even after a big stock market rally, it says the typical working age household has only $3,000 saved for retirement. message is, spend, spend, spend, spend, it's good for the economy, we need it for america to recover but shouldn't it be save, save, save? >> i think it's a seesaw and belongs in between. healthy spending is good for the economy. think back to 2009, when nobody spent anything out of fear. and restaurants were empty, everybody got laid off, wait tretss and busboys. and car show rooms were empty, auto manufacturers laid off employees. we need healthy spending, consumers have learned a very important lesson about dangers of excessive spending, credit

and debt. we need spending to keep the economy going. we don't need people to spend their way into debt. and belatedly, i hope the younger generation learned the lesson that a little bit saved for retirement in your 20s, time works magic if you let it grow and invest. people approaching retirement are realizing that they only can save their way out of it and that's a real tough spot to be in. et cetera specially when your job is insecure and you play not get to work the extra three years that may make up the difference. >> everyone needs to save more earlier and spend smartly. some of the things we spend money on are not the best prioritied. and that just comes fromming smart. you've been asking this question, can we afford this consumer economy? can we? >> right. well the short answer is, no, we can't, not if we keep going the way we're going now. we are americans, right? we want what we want when we want it. >> now. >> the problem is -- right now. the problem is it's not sustainable on a bunch of level.

first the kinds of jobs the economy's creating, right, it's creating part-time jobs. it creating lower wage jobs. that creates consumers who can't spend when they want to and boost the economy. it creates people who can't plan for the future. it creates people who work 30 hours a week and thus doesn't goat benefits instead of 40 hour a week with full-time benefits. there are real costs to what's going on in the economy. the problem is that there are going to be long-term costs nobody can see yet. >> i'm scared to death so many of the jobs we've created in the recovery are low wage jobs $13 or less an hour. two-thirds of the job -- a third of the jobbed in america make $24,000 a year or less. that's really terrifying for saving for retirement and saving to sending kids to college. americans have been repairing balance sheets at the same time. household debt at its lowest several since 2006. student debt has been exploding. are we graduating a generation

of debtors who won't have the ability to spend to buy a house, to buy a car, to move forward? that's going to reshape the economy. >> absolutely. you know, i've been saying this, you've been saying this for a long, long time, graduating students into debt and no jobs. but these economic cycles unfortunately take a while to unwind. and what we're seeing now is colleges competing for students offering more aid out of their endowments, cutting prices, cutting offerings to be sensible about how they spend resources. i just can't paint the pictures so negatively because we never know what's around the corner. in the apartment '80s a great f opec oil embargo for the beginning of the decade we thought we had a heartland recession. who knew the internet and technology would bring us tremendous growth and productivity. as you look forward, we don't know what the next thing is around the bend but one thing is, cheap energy. america's about to be awash in oil. that could change everything, the components into growth.

so i don't think the picture for the future is necessarily so bleak. yes, you have to save, yes, you have to invest. but you don't have to crawl under a rock not lib your life. we need to readjust our priorities. >> and i've been spending time talking to college kids, i gave a commencement earlier this spring, they don't know what they don't know, which is cooling and they're optimistic. >> yes. >> they don't know what we've gone through over the past four years. if they do they don't have the perspective to put it in. these kids, i think, are going to be -- they have all of the adversity but they're actually -- it's up to them to fix it all. >> i think that's exactly right. i mean so one of our reporters has been doing a piece out of cincinnati on kids coming out of a high school there, the oiler school, they're looking forward to getting out into the economy, going to college, figuring out what's what. they are seeing the economy is growing, right, it's growing in terms of jobs, it's growing in terms of gdp. not as fast as we want, not as fast as anybody want but was

it's growing. line five years when graduateser where going, what am i going to do? graduates have a hope, a chance things are going to work out and find a job that means something. >> nice to see both of you on the show. great conversation. let's have it again soon. >> up next, is this housing market hot or just full of hot air? >> we literally own the air above this house. >> why a seattle couple that bought the space above the neighbor's home and why others neighbor's home and why others are doing the same thing. the great outdoors... ...and a great deal. thanks to dad. (gasp) nope. aw! guys! grrrr let's leave the deals to hotels.com. (nice bear!) ooo! that one! nice! got it! oh my gosh this is so cool! awesome! perfect! yep, and no angry bears. the perfect place is on sale now.

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six years now after home prices collapsed in the u.s., the housing market is back. it's booming in some parts of the country. the pace of building is picking up. existing home sales are up almost 13% in the past year, home prices, prices, up more than 15%. before you break out the

champagne, consider inventory. it is tight. what does that mean? it means very few homes are on the market, and those that are going often sell quickly. flash sales are heating up in once hard hit markets like texas, california, florida, arizona. it's tough to get in. many homeowners are learning to love the homes they already have. in seattle that may mean protecting a view. one couple actually bought and sold the house next door but retained the air rights above it. that way future neighbors can't build up and block their view. it cost them a cool $100,000. it's a growing trend in that area. in boston there's something else going on less extreme. >> in boston it is all about construction. that is the game to be in right now. people are doing very well in construction right now and here is why. during the recession you had a lot of construction companies that were forced to close down, forced to lay people off. now that housing is back, you have more construction work to be done but fewer construction

companies doing the work. obviously great news for anyone in the business. i actually spoke to one boss who said for the first time in his eight-year career, he has so many offers to work, he's actually having to turn some of them down. >> we can cut the pieces. >> reporter: adam has a problem many people in this recovery only dream of. >> instead of the stress of not finding the work, i have the stress of too much work. >> reporter: it's more proof that the recovery in housing is real, and a big change from the height of the recession when he was forced to close down. >> one of the hardest things to do as an employer is to tell the people you're feeding that they don't have work anymore. it was one of the most difficult times in my career. >> reporter: across the country contractors building single family homes are applying for new permits faster than at any time in the last five years. but here in boston, space for new construction is limited. >> people do value living close to the center city. we don't have in the boston area

large plots of land available for large-scale development. as other parts of the country do, the southwest, southern california, florida, other parts of the south overall. >> reporter: the solution? buy an old home and then renovate it. >> this was and will be the living room. >> okay. >> reporter: the cost of gutting and rebuilding this interior, $400,000. >> we just decided to pull the trigger and do a 100% gut on walls, electrical, and plumbing. >> reporter: renovation spending is expected to rise 20% this year. homeowners who are staying put are also spending. the cost to renovate this kitchen, $60,000. >> people have their financial resources and the destir to lsi in a home that they want. >> reporter: he's concerned rising interest rates may discourage potential buyers.

what's going to happen to the business? >> i don't know. i don't think we'll be getting as much as the $200,000, $40,000 jobs. my focus is to keep the company on progressive growth without growing too big. it's not fun to lay people off. >> i think the take away is even though housing is back, even though it's slowly taking up, it is still from a jilagile. i think it's going to be very interesting to see what happens to housing. we know that housing is up for three reasons, high demand, low supply, and, of course, those low interest rates. when interest rates slowly start to tick up, i think it's going to be -- i'll be curious to see how the story ends. >> my hope is when you have interest rates start to rise, but you have more inventory, you get a healthier balance and that means more jobs and more money in people's pockets. >> we do need more inventory. >> we definitely do. the school year is ending. are your personal financial grades bad enough to earn a spot in summer school?

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how would you grade the economy? if you don't have a job, you might give it an "f," but if you're in the stock market, it might get an "a." the economy is still on fragile ground but the recovery is for real. a new poll shows a growing percentage say economic conditions are good. 35%, a number that's been steadily rising since the end of 2012. that's how you're feeling, but i have been conducting a little poll of my own. the school is out for summer, the report card fon the economic recovery is in. >> reporter: summer is here and the stocks are in turmoil after a 13% gain. unemployment still too high. investors are making a fortune in housing, but nearly 10 million people owe more on their mortgage than their home is worth. let's look at it this way, let's give it a good old-fashioned

letter grade starting with a man whose firm manages $2 trillion. >> i would give the economy a "b" to a "b" plus. it's getting better but not fast enough. >> he buys and sells bonds. these guys are real estate tycoons. >> i would say it's a "c" plus. >> what do you think? >> "b" plus. >> here is a harvard professor. >> i think it's a "b" plus at this point. we should be creating way, way more jobs. >> and the view from the stock market? >> i think a "b" minus, maybe more of a "c" plus. because the government sector is fading. remember, government job growth is fading. >> reporter: he's talking about washington belt-tightening at exactly the wrong time says this former clinton adviser. >> on fiscal policy from the congress, i'm afraid i will not give a passing grade right now. >> reporter: "wall street journal" editorial writer and critics of the obama administration. >> i give it a "b" minus but i'm optimistic about the future. you have the low interest rates, the housing recovery. i'm pretty optimistic we may see that "b" minus turn into a "b"

plus. >> reporter: finally the former chair of president obama's economic team doesn't give a grade but nails how many americans are feeling. >> i don't know. on the economic conditions i'd say modest at best. >> the average for the u.s., it's about a "b" min muss. the eurozone gets a "d." and china, that grade is a "b" plus, but it is slipping. so the u.s. is doing pretty well compared with the rest of the world, but these grades matter less than how you grade your personal economy, right? here are five ways you can improve your marks. these are all pass/fail. spend less than you earn. cut your debt. save for college and retirement, rebalance your investments. do it now. and refinance your mortgage. all right. thanks for joining the conversation this week. join me at 2:00 p.m. eastern for a brand new edition of "your money." a distinctional government, crumbling infrastructure, crushing levels of student debt, stagnant wages. do you feel like you're living

in an american that parallels rome before the fall? until then i want to hear what grade you are giving to your personal economy. find me on facebook and twitter @christineromans. cnn "newsroom" starts right now. good morning. i'm alison kosik. it's 10:00 on the east coast, 7:00 in the west. this is cnn "newsroom." let's begin with some charges against edward snowden. he admitted that he leaked details of the nsa's surveillance program. he's in hiding in hong kong right now, but the extradition process, it may not be under way. cnn white house correspon